Cultivating Profits

We’ve all heard the stories about rising food prices around the world.

The cost of food is up everywhere -- from 40% to 50% for some foods and over several hundred percent in certain parts of the world.

There are many reasons for this spike, including reduced worldwide harvests, rising fuel prices, acreage competition from bio-fuels, increased demand from rapidly developing countries, and even acreage competition for feed grains as demand for meat has increased.

In South Africa, for example, food prices have increased by 50%. Meanwhile, other areas, such as Sierra Leone, have experienced jumps of more than 300%.

Even in the US, there’s been an increase in food prices. In fact, there’s been a 41% increase in wheat, corn, rice and other cereals.

However, this has not hurt the US as much as it’s hurt developing countries.

Here in the US we spend only about 10% of our disposable income on food. This is a sign of a highly developed economy.

But in countries like India for instance, it’s over 40-50%. And sadly, if you’re poor, it’s the majority of your expenditures.

Even in some European countries, people spend more than twice what the US spends on food.

So here in the US, we have it pretty good.

But as the standard of living increases in other countries due to their growing economies, so do their diets and food demands. This is a good thing in and of itself. However, as demand increases, so do prices.

For example, demand for meats has increased substantially. But this increased demand for meat is causing acreage to be shifted from growing grain for human consumption to growing grains for feedstock, which further increases prices.

The bottom line: The world is eating more than it produces.

Even global stocks of food like cereals have fallen in recent years to their lowest levels since the 80s.

Given increased demand for food, rising energy costs and competition from bio-fuels and feed grains - not to mention weather problems and reduced harvests worldwide - you’ve got the situation we’re in today.

This won’t be an easy fix.

But for those companies who step up and provide solutions by increasing food production, services, support and transportation, there will be plenty of opportunities. And investment in these companies helps provide the necessary capital to find solutions.

• The screen I’m running today scans several industries:
  
  • Food
    
  • Food/Drug-Retail/Wholesale
    
  • Chemicals & Fertilizer
    
  • Machinery
    
  • Utility-Water Supply
    
  • Transportation

• It then looks for Zacks #1 Rank stocks
  
• And all the stocks are >= $5 and have an average daily share volume of >= 50,000

Thirty-six stocks came through this screen. Here are three of them:

ASTE - Analyst Report Astec Industries, Inc.
SBS - Analyst Report Companhia de San Basi (SABESP)
OLN - Snapshot Report Olin Corp.

If you want to tighten it up, consider adding other items such as EPS Growth Rates, Upward EPS Revisions, ROE, etc.

If you’re looking to broaden your list of choices and then further dig into the companies, consider opening up the screen to Zacks #2 Rank stocks as well.

Either way, this is a fine place to start as you search for ways to invest in the very important business of food.

Sign up for your free trial of the Research Wizard and get the rest of the stocks on this screen and start screening your own ideas right now. And then backtest them to see how they work. It’s easy to do and you’ll be on your way to picking better stocks immediately.

Click here for your free trial to the Research Wizard

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Read the full analyst report on OLN

Read the full analyst report on SBS

Read the full analyst report on ASTE